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Special Needs Planning

Special Needs Planning

Special needs estate planning focuses on providing for the special needs of our loved ones with disabilities when we are no longer there to organize and advocate on their behalf. Parents of children with special needs must make careful estate planning choices to coordinate all of the legal, financial, and special care needs of their children – both now and in the future.

Special Needs Trusts

  • Special needs trusts (also known as “supplemental needs” trusts) allow a disabled beneficiary to receive gifts, lawsuit settlements, or other funds and yet not lose his or her eligibility for certain government programs.

  • A Special Needs Trust can also protect a spouse who is receiving, or likely to receive, Medicaid benefits for nursing home care from being disqualified for benefits. Such trusts are drafted so that the funds will not be considered to belong to the beneficiary when determining eligibility for public benefits, such as nursing home care.

  • An individual shall be considered to be disabled for purposes of this subchapter if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than twelve months.

First Party Special Needs Trust

A First Party Special Needs Trust is a type of SNT where the trust is funded with the assets of the disabled person. Typically, these type of SNT are created when the disabled person receives an inheritance, gift, or a settlement from a lawsuit.

A major drawback to the First Party Special Needs Trust is that it must contain a certain payback provisions. The effect of this provision is that when the disabled person passes away, any funds left over in the SNT will be used to cover any funds that Medicaid provided during his or her lifetime. However, the benefit of maintaining Medicaid typically far outweighs the Medicaid Payback provision.

Third Party Special Needs Trust

Third Party Special Needs Trust is a type of SNT where the trust is funded with the assets of a third person. Third Party Special Needs Trusts are usually funded either by the Last Will and Testament or the Living Trust of a disable person’s loved ones (like a parent)

In order to have the assets of the SNT not countable for the purpose of SSI and Medicaid programs, the disabled person must not have the power to revoke the trust, terminate the trust, or direct the trust assets to be distributed for his or her support.

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